ContractsIntermediateNorth Carolina Exam

Under NC's standard Offer to Purchase, what happens if the property is substantially damaged by fire between contract acceptance and closing?

AThe seller must rebuild before closing

BThe buyer may terminate the contract and receive a refund of all depositsCorrect

CThe buyer must proceed with closing at a reduced price automatically, in general

DThe lender assumes responsibility for the property

Why The buyer may terminate the contract and receive a refund of all deposits Is Correct

Answer B: The buyer may terminate the contract and receive a refund of all deposits

If the property is substantially damaged before closing, most NC purchase contracts allow the buyer to terminate and receive full deposit refunds, as the property has materially changed from what was contracted.

Exam Tip: Contracts

Contract questions frequently test the essential elements required for a valid contract. Remember: competent parties, mutual consent, lawful object, and sufficient consideration. Watch for void vs. voidable distinctions.

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Key Terms to Know

Earnest Money

A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.

Contingency

A condition in a purchase contract that must be satisfied before the sale can proceed to closing.

Purchase Agreement

A legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.

Option Contract

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.

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Real Estate Contracts Guide

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